Falling water levels and cutthroat competition are among the five main challenges facing port operators along the Yangtze River, just as manufacturers increasingly shift production to central and western regions.

Outlining the problems, Gu Qiangsheng, general manager of the Wuhan Port Group, said the other difficulties were terminal overcapacity, obsolete port equipment and inadequate support facilities, including container repair and data processing.

'We have yet to fundamentally improve the water supply during a drought upstream to Wuhan,' he told a shipping conference organised by the Journal of Commerce in Shanghai yesterday.

He said the water depth during drought conditions was down to 2.8 metres and cargo-carrying vessels were unable to reach Wuhan.

Gu said that although there were moves under the 12th five-year plan to increase the navigable water depth to 4.5 metres during the dry season, proposals to dredge the river bed by 2015 were still being prepared.

He added that local and provincial authorities had encouraged the development of terminals and docks, causing overcapacity. This meant port operators offered 'low-quality services and price-cutting competition to attract customers', Gu said.

Hutchison Port Holdings, in a joint venture with Sinotrans and Shanghai International Port (Group), has invested in terminals in Wuhan, while SIPG has stakes in seven ports along the Yangtze River.

Joe Monroe, head of United States-based research company Joe Monroe Consulting, said 36.6 billion yuan (HK$44 billion) had been earmarked to improve port and transport facilities along the Yangtze - nearly three times the budget under the 11th five-year plan.

Reiterating concerns about overcapacity, Monroe said Luzhou, upriver of Chongqing, last year handled about 80,000 teu, a unit based on the volume of a 20ft container.

Monroe estimated that, with expansion projects underway at Luzhou and other ports in the upper reaches, capacity would reach 7 million teu in 2015, compared with forecast throughput of 2.2 million teu.

Xu Weiping, general manager of Luzhou Port Group and Sichuan Changtong Port, said the port had a capacity of 200,000 teu, but work was underway to expand capacity to 1 million teu and the aim was to double this to 2 million teu.

He noted it cost 2,800 yuan to transport a container by ship from Luzhou to Shanghai compared with 6,400 yuan by rail. He was optimistic box volumes would rise as Sichuan increased its focus as a vehicle manufacturing centre following the arrival of firms such as Volvo and Toyota.

Wuhan port handled 200,000 vehicles last year, according to Gu.

Pointing to the shift of manufacturing to central and western regions, James Yeh, deputy managing director and regional head of China for Taiwan's Wan Hai Lines, said a factory worker in Shenzhen earned 900 yuan a month in July 2009. 'Now that worker can't be recruited for less than 2,000 yuan a month,' he said.

With rising wages in central and western cities, Shenzhen's migrant workers preferred to return home to these provinces to work, he added.

Yeh also pointed out that it typically took 10 days to ship a container 1,800 kilometres from Chongqing to Shanghai because of stopovers in ports along the way.